The Doctrine of an Innkeeper’s Liability: Is the Franchisor of a Hotel Liable for the Negligence of its Franchisee?

Both a long-respected legal doctrine and a core principal of the hospitality industry, the top priority of hotel owners and operators is to protect the safety of their guests. Equally, owners and operators are usually deemed culpable for negligent behavior. But when does the obligation to guard the safety of guests extend to the brand provider?

If posed to any of the brand franchisors within the hospitality industry, this question would be answered with a simple “Never.” A franchisor is shielded by carefully crafted language in nearly all franchise agreements, several paragraphs of which clearly exculpate them from liability in negligence action. By defining properties as independent contractors, these agreements further clarify that the franchisor assumes no responsibility for the operations at a given lodging property.

Hotels and lodging constitute a multi-billion-dollar global industry, with over 55,000 hotels in the United States alone. Standards of care and best practices are generally defined in operating or “standards” manuals published by each brand. Many states have enacted laws that regulate or impose minimal operating requirements. Organizations like the American Hotel and Lodging Association (AH&LA) have defined “best practices” to which hotel managers and management companies should adhere to further promote the safety and welfare of guests.

The classic negligence action involving hotels is a slip and fall— the bathtub was too slick; cleaning solvents left on a tile floor resulted in a slippery condition; water on a hard-surfaced floor within the common areas; or a fall in the parking lot. These claims account for the majority of negligence cases against hotels and seldom, if ever, involve the brand provider.

Having spent the last 37 years of my career with multi-unit, publicly traded lodging companies, I find any guest injury to be unacceptable. Loss of life is tragic, particularly when a life-threatening incident was reasonably foreseeable and could have been avoided. Negligence and lack of attention on behalf of the operator, the owner, and the brand is never acceptable. Even more tragic is the loss of a child’s life.

Negligence comes in all forms, such as failure to adhere to the law. I have often been asked to define the spectrum of negligence, from ordinary negligence to the failure to comply with brand standards or operational mandates found in manuals. These documents are provided to an owner and operator by the brand under whose flag the property is operated. The issue of imposing liability on the branding company, on any theory of negligence, has been a challenge for those who have been injured.

Recall my earlier comment about the ways in which franchisors exculpate themselves from liability. Franchisors quickly disclaim any operational control over the hotel bearing their brand— and yet, these same franchisors impose requirements on the hotels which operate within their system. To maintain uniform brand standards within their system of hotels (albeit, such hotels are usually under third party ownership) the brands send quality assurance inspectors to administer those standards, usually placing non-compliant hotels on notice and requiring remedial efforts be taken within a defined timeframe.

Hotel properties being converted from a different brand are subject to rigorous inspection and the completion of what is commonly known as a product improvement plan (PIP). Prior to opening of the hotel, brands typically require safety deficiencies to be addressed as part of the re-branding process. Cosmetic deficiencies are given leeway for completion based on capital requirements.

The question I would pose to the reader is the following— notwithstanding all claims that the franchisee is an independent contractor and, at times, conspicuous notifications that a property is being managed under license by the franchisor, how can a licensing organization that dictates brand standards with inspection rights maintain that it is independent? Does the licensor’s contractual authority to remove a location from its system not come with a duty? Would that duty not be greater if standard deficiencies were to coincide with a deficiencies in life safety standards?

I was a retained as an expert witness for a wrongful death case that illustrates this conundrum. One of the numerous defendants was a nationally recognized company that licensed its name for marketing cottages within a “vacation club” on a Caribbean island. The client had no operational responsibilities nor did it set forth operating guidelines or require inspections. Its sole obligation was to allow the developer, also a defendant in the action, to use its name in promotional literature for the purpose of selling cottages as vacation homes.

The owner of the unit in question offered the cottage to a family for vacation use. The occupants were not owners or members of the vacation club and had no contractual privity with the developer, the management company, or the company licensing the use of its corporate name. Due to an overloaded extension cord, the cottage caught fire trapping and killing one of the children. While the other three family members escaped the blaze, several sustained severe burns that resulted in life-long permanent injuries.

The plaintiff in this multi-party action attempted to impose liability on the brand provider on multiple theories of negligence including failure to inspect, failure to adopt proper minimum life safety standards and failure to have fire extinguishing equipment, all of which resulted in death or injury to these plaintiffs. On what theory or theories would a brand provider be liable in this instance? No proof could be offered that the branding company exercised any dominion or control over the facility or its operations. The branding company made no inspections of the property nor did it have any contractual obligation to do so. It took no part in booking the accommodations for the plaintiffs.

One of the plaintiff’s experts had a fascinating profile. A well-educated academic from a distinguished university, this expert testified as to the “Sociology of the Guest Experience,” providing some elaborate statistics and charts demonstrating the anxiety level of guests who arrive at an unfamiliar lodging property. According to this testimony, it is incumbent on anyone involved in the guest experience to ensure the safety of all aspects of a lodging facility, in order to alleviate these feelings of angst. I have often wondered if travelers, particularly children, about to embark on a Disney experience at a Disney hotel share those feelings of anxiety. This expert had never been employed by a lodging company at either the corporate or property level.

The case, which was ultimately settled for an undisclosed sum, demonstrates the lack of uniformity in determining liability against the branding company in a hotel negligence action. The greatest variable is the degree to which the brand exercises control over the operations of the hotel.

In the real world of hotels, few dispute the power of brands to designate operational practices and standards. Every franchise agreement includes the right to conduct inspections and remove the property as a franchise if deficiencies in product or operational practices are noted. And yet the brands deny having operational control over a branded hotel within their system. When the brand has contractual rights to specify the manner and means by which a hotel is operated, the common defense of the owner/operator being an independent contractor is tenuous at best.